Backpackers Downunder will travel to New Zealand to work instead of Australia after the government kept the backpacker tax in its budget, the tourism industry has warned.
The sector is bitterly disappointed the Turnbull government has upheld the hefty income tax for people on working holidays.
"This budget locks in a tax that will deliver a negative result for Australia's tourism industry and which will drive our backpacker visitors into the arms of our New Zealand competitors," Australian Tourism Export Council managing director Peter Shelley said on Tuesday.
National Tourism Council manager Steve Whan echoed his concerns.
"We're very disappointed by this failure to revise the tax, which we're concerned will hurt labour supply in regional areas," he said.
The tax, due to kick in on July 1, will see tourists slugged 32.5 per cent from the first dollar earned.
However, both bodies welcomed new revenue-building measures in the budget, such as a VIP border clearance, a user-pays service at airports which has long been advocated by the industry.
A freeze on visa fees and overseas passenger processing fees was also praised.
Small tourism operators will benefit from the tax cuts slated for small business, while Tourism Australia has also retained its $143 million government funding for 2016-17.
And while passport fees have been increased, Mr Whan said he didn't think it would greatly deter Australian travellers.
Australians now have to stump up another $20 for a new passport, while priority processing fees have increased by $54.